Microsoft and Nvidia are the second and third global companies by market capitalization at $US3.02 trillion and $2.06 trillion respectively.
Both face competition, but both have wide moats and are at the heart of artificial intelligence developments. Here are updates on these stocks.
Microsoft (NDQ: MSFT) Recent close $393.41. (All figures in US dollars.)
Background: Microsoft is the world’s largest software company. Its Windows operating system runs on about 90% of the world’s personal computers. Microsoft also owns LinkedIn and markets the Xbox gaming system.
Performance: The shares are up 8.9% year-to-date and 32% in the last 12 months.
Recent developments: Microsoft’s fiscal third-quarter results were impressive, exceeding estimates on the top and bottom lines. Revenue of $61.9 billion grew 17% year-over-year. Net income of $21.9 billion, or $2.94 per share, was up 20% from the same quarter a year ago.
Notably, the Microsoft Cloud segment, called Azure, played a significant role with revenue reaching $35.1 billion – a 23% year-over-year growth. This shows a dominance in cloud services.
A few days after releasing its latest earnings, Microsoft announced it will invest $1.7 billion over the next four years in new cloud and AI infrastructure in Indonesia.
Discussion & outlook: Microsoft’s momentum is poised to continue as artificial intelligence applications accelerate. An AI software feature called Co-Pilot comes with my MSFT 365 home subscription. This tool generates relevant text, photos, and videos in response to prompts. These are early days. I asked it how it rated Microsoft’s latest results, and it was the one who told me they were impressive.
Dividend: Microsoft’s increased its dividend by 10% with the December, 2023 payment to $3 annually, its 10th consecutive year of increases. The payment yields 0.9% at current prices. It also has an active share repurchase program.
Nvidia (NDQ: NVDA) Recent close $820. (All figures in US dollars.)
Background: Nvidia is best known for the graphic processor units used in gaming systems, but it is also a leader in the chips used in artificial intelligence (AI) and cloud-based computing. These chips run autonomous robots, self-driving cars, and drones.
Performance: Year-to-date, the shares are up 65.2%.
Recent developments: Fourth quarter results were released at the end of February and were also impressive. Quarterly revenue of $22.1 billion was a record, 265% higher than the same period a year ago. Earnings per share of $4.93 was 765% higher than a year ago. Full-year revenue of $60.9 billion was also a record, up 126%.
On the strength of that performance and the release of a new high-power processor aimed at the data centre market, Nvidia’s shares hit a high of US$974 in late March. They have since given about 16% of that back.
The new processor puts two squares of silicon in the same space as the company’s previous offering. Nvidia also detailed a new set of software tools to help developers sell artificial-intelligence models more easily to firms that use its technology.
CEO Jensen Huang estimated that companies operating data centres will spend more than $250 billion a year to upgrade them with the latest, fastest chips. He said Nvidia is shifting from selling just chips to complete data centre systems.
Discussion & Outlook: Nvidia’s market share will likely drop as competitors launch new products, but its dominance is not under threat. Like Microsoft, it is at the forefront of a technology in the early stages of adoption.
Dividend: Nvidia pays a $0.16 annual payment which yields 0.02% at current prices. It also shas an active share buyback program.
Adam Mayers 
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